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  • GDP Report Shows the Economy is Stalling

    It appears that the debt ceiling fiasco will finally be put to bed with a Senate vote later today, as I predicted. But not before our leaders in Washington led us to the brink of another financial crisis. Frankly, the new debt ceiling deal is UGLY as I will discuss below. But before we get to that, we have to look at last Friday's very disappointing GDP report - it was a shocker. So was the Fed's latest assessment of the economy last week. And so was yesterday's ISM manufacturing report which plunged in July. It is now clear that the US economy is very close to moving back into recession again.

    None of this is good news for the stock markets, which are down again today following a significant sell-off last week. The debt ceiling drama pointed out to millions of Americans just how dire our national financial situation is, and they are moving out of the stock markets in droves to the safety of Treasuries or cash. Is this an overreaction? I'll give you my thoughts as we go along.

  • Why the Economic Recovery Isn’t Stronger

    We are told that the recession ended in the 1Q of 2009, but for most of us it sure doesn't feel like it ended at all. The official unemployment rate is still near 9% (near 16% if you count everyone), and the economy is struggling just to eek-out 3% GDP growth. In the past, the economy soared by 5-6% GDP or even better following severe recessions. So why isn't this economic recovery stronger?

    As I will discuss today, consumer confidence took a surprise dive in March. The latest figures on the housing market were simply dreadful across the board. Bank lending remains in the tank. And private investment in the US, especially by foreigners, has fallen off a cliff as a result of the recession and the falling US dollar. These are all reasons why the recovery is so sluggish, and they are not likely to change soon.

    The US equity markets have been on tear to the upside, despite the disappointing news on the economy. It seems that virtually everyone is convinced that stocks can only go higher, but that's usually a sign to look out below. Whatever happens, this is a very uncertain time in the markets!